Related Summaries

The European Commission plans to propose phase-in of the Basel Committee on Banking Supervision's trading-book rules, rather than use a single start date in 2019, according to a draft document. The EU also intends to apply a modified approach to capital requirements concerning covered bonds and sovereign debt.

The Basel Committee on Banking Supervision has unveiled updated trading-book rules for major banks. The rules include a 40% increase in capital requirements on swaps, bonds and other securities, effective in 2019. A previous draft called for a 74% increase, which industry groups say would have materially affected liquidity in key markets. Read GFMA's media release.

ISDA responded to a review of trading-book capital rules by the Basel Committee on Banking Supervision by proposing an alternative approach. The association also encouraged regulators to avoid disincentivizing financial institutions from improving internal models.

The Basel Committee has assessed the effects of amendments adopted in July to rules covering trading-book capital. "Increasingly complex trading-book exposures were a major driver of losses in the recent crisis," said Nout Wellink, chairman of the Basel Committee and president of the Netherlands Bank. "The reforms will ensure that these exposures are backed by a sufficient capital cushion, help address pro-cyclicality of trading-book capital requirements and limit arbitrage opportunities between the trading book and the banking book."

The Basel Committee on Banking Supervision conducted an impact study on capital requirements for banks that run trading books. The committee will insist that financial institutions must keep a higher proportion of capital against their open positions. "Increasingly complex trading-book exposures were a major driver of losses in the recent crisis," said Nout Wellink, chairman of the Basel Committee.